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Law 11/2020, of 18 September, on urgent measures regarding rent containment in housing lease contracts and the modification of Law 18/2007, Law 24/2015 and Law 4/2016, relating to the protection of the right to Fast guide housing. Effective date: 22 September 2020 To the rent price

containment law Purpose of the Law

The purpose of the law is to contain and moderate the rental price in certain areas that, due to their characteristics, do not guarantee rental housing at an affordable price, thus hindering access to the entire population.

What contracts does it apply to

It applies to rentals of homes intended for permanent residence and that are located in places that have been declared tense housing market areas.

Tense housing market Reference price Price increases Contract and incidents Tense housing market Reference price Price increases Contract and incidents

Can all municipalities be declared tense housing Who can declare a tense housing market area? market areas? • The Department of Territory and Sustainability of the No. For a municipality or part of it to be declared a tense Government of housing market area, it must have a reference index for • The following local authorities: rental prices. -- City Council, in Barcelona -- the Metropolitan Area of Barcelona, in the 36 municipalities comprised in it This declaration can be made by: What is a tense housing market area? -- own initiative -- at the initiative of the corresponding town councils, They are municipalities or parts of a municipality county councils or provincial councils (neighbourhoods or districts) at risk of failing to make rental housing available at a price that is affordable to the entire population, because one of the following situations applies to the average rental price: • sustained growth well above average for Catalonia How long does a tense housing market area • represents a burden on the family or personal budget of more than 30% of the usual household income declaration last? • exceeds 30% of the average income of people under 35 • The declaration cannot exceed 5 years. years of age • It can be revised to shorten its duration or it can be • in the last 5 years, accumulated year-on-year growth of at invalidated. least 3 points above the Catalonian CPI • It can be extended if the circumstances that motivated it continue. • The administrations involved must state the actions that they will carry out during this period to mitigate or change the tense market situation.

Fast guide to the rent price containment law 2/10 Tense housing market Reference price Price increases Contract and incidents

To which municipalities does the Law apply as of its Sant Vicenç dels Horts El Vendrell effective date? Santa Perpètua de Mogoda On a transitional basis, the Law has declared the following Vilafranca del Penedès sixty-one municipalities as tense housing market areas: Tarragona Vilanova i la Geltrú Tortosa Barberà del Vallès Barcelona Blanes Olot Calafell Palafrugell Castellar del Vallès Pallejà For how long will the tense housing market area designation apply to these municipalities that have Cerdanyola del Vallès El Prat de been set transitionally? Cornellà de Llobregat Premià de Mar Reus For a period of 1 year. Figueres After that year has elapsed, the competent bodies may: Gavà Rubí • Gerona Issue a new tense housing market area declaration for that municipality in accordance with the established procedure. Salou L’Hospitalet de Llobregat Salt • Do nothing, in which case the municipality will no longer be Sant Adrià de Besòs considered a tense housing market area. Lérida Sant Cugat del Vallès Sant Feliu de Guíxols Mataró Sant Joan Despí Mollet del Vallès

Fast guide to the rent price containment law 3/10 Tense housing market Reference price Price increases Contract and incidents

When does rent containment not apply? What is the Rental Price Reference Index?

Rent containment does not apply, even if the affected area has The rental price reference index is a public consultation been declared a tense housing market area, to homes that: indicator that makes it possible to estimate the average rental price per square metre of a home located in a given area, as a • Have rental contracts signed prior to 1 January, 1995. function of certain defined characteristics. • Have a specific system for determining rents: This Index is determined and published by the Department of -- social housing Territory and Sustainability of the Government of Catalonia, -- integrated into public insertion networks or social and is calculated based on housing data that we must enter renting mediation, or into a rental housing fund for into a form. social policies -- welfare housing -- compulsory social rent What is the maximum rental price for a home in a It also does not apply to contracts prior to the effective date tense housing market area? of this law, which will continue to be governed by the law ap- plicable to them at the time they were concluded. In rental contracts that are concluded in tense housing market areas, rent may not exceed either of these two limits or caps: In the event of a novation, the new rent containment law will only be applied if the novation implies an extension of the • The reference price for renting a home with analogous duration of the contract or modification of the rent. characteristics in the same urban environment. • The previous rent updated according to the In the declaration, application of rent containment can be Competitiveness Index if the home has been rented in the excluded for dwellings with a useful surface area greater than last 5 years. This last criterion does not apply in these two 150 m2. cases: -- The previous tenant was a relative of the home owner and that led to this lower rental price. -- The contract affects a home that was initially excluded from the application of this law because it is subject to a special system for determining rents.

Fast guide to the rent price containment law 4/10 Tense housing market Reference price Price increases Contract and incidents

And what is the reference price? How can the tenant know the previous rental price?

The reference price of a home is that established from the Advertising of rental housing that includes the price located Rental Price Reference Index, without taking into account in a tense housing market area must indicate the previous the upper and lower margins, increased or decreased by 5% rental price, updated in any case with the competitiveness depending on the characteristics of the home. For this increase guarantee index. In addition, the home-owner must inform the to occur, the home must have at least three of the following tenant responsibly and in writing of the date and amount of characteristics: the rent of the previous lease. Likewise, the tenant may request information from the previous rental contract from once • lift Incasòl the rental contract has been signed, or beforehand if they have • parking a written authorisation from the owner, • furnished home It should be noted that: • heating or cooling system • Concealing from the tenant that the rental contract is • communal shared use areas subject to the rent containment system, or the rental amount from the previous rental contract, implies the • community pool or similar equipment commission of a serious infraction. • concierge services in the building • Failure to include the information necessary to calculate the • special vistas maximum price in accordance with the rent containment system (that is, in any case the reference index price and, if it exists, the rental price from the last contract) represents a minor infraction. What is the Competitiveness Guarantee Index?

When the price of the previous contract is taken as a reference, the amount of the rent agreed in said contract must be updated with the Competitiveness Guarantee Index. To know its value, the INE (National Institute of Statistics) website must be consulted. When this index shows a negative value (as it has since 2015), the update is 0%.

Fast guide to the rent price containment law 5/10 Tense housing market Reference price Price increases Contract and incidents

Does this law also affect newly-built homes, or What if different parts of the home are rented homes that have undergone a major rehabilitation simultaneously? process? In this case, the sum of the different rents existing They are not affected until 3 years after the Law becomes simultaneously in the same dwelling must not exceed the effective, that is, until 22 September, 2023. maximum rent applicable to the dwelling as a unit. As of that date, the reference price of a newly-built home, or one that has undergone a major rehabilitation process, is established from the Rental Price Reference Index, taking into Can general expenses and individual services (IBI/ account the upper margin. Real Property Tax, rates, community of owners, etc.) Exception: If public subsidies have been obtained, the rent will be passed on? be applied according to the index without the upper margin. It should be taken into account that failing to comply with Expenses can be passed on if agreed with the tenant. In these rent determination criteria is a serious breach of the this case, these items must be recorded in a detailed manner law. on each monthly receipt, distinguishing them from the amount of the rent. However, if the home has been rented in the last 5 years, only the expenses considered in the previous rental contract can be passed on, even if the home changes tenant. What does major rehabilitation mean?

As established in article 3.h of Law 18/2007, major rehabilitation is defined as the set of building work that consists How does the tenant know that the amount he/she of the demolition of a building, saving only the façades, or has paid for general expenses and individual services that constitutes a global action affecting the structure or the is the same as the amount charged to the owner for general use of the building or of the rehabilitated home. these items?

Each January the owner must send the tenant the settlement of the expenses actually paid, stating the total paid by the tenant and the total paid by the owner for this amount.

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What if the settlement shows that the tenant has paid a higher amount than the owner has paid for general expenses and individual services?

The owner will have to return the difference.

Is there any special provision based on the income of the owner?

The Law provides for an exception in the application of the rent containment system when the owner is a natural person whose co-living unit has an income equal to or less than 2.5 times the IRSC (indicator of income sufficiency of Catalonia, which is €1,480.30 in 2020), also counting the rental income. In this case, the rent cannot exceed: • the rent established in the last lease contract if this is above the reference price; or • the reference price, if the rent established in the last lease contract is below the reference price. However, this special provision does not apply when the tenant has an income below 3.5 IRSC (€ 2,072.42 in 2020).

Fast guide to the rent price containment law 7/10 Tense housing market Reference price Price increases Contract and incidents

Can the reference price vary if home improvement If the owner has received subsidies or public aid for work has been carried out? the improvement of the home, can they be counted as invested capital? Yes, if the work has been carried out within the last year, before the contract was signed, and if it was done to improve: Subsidies or public aid cannot be taken into account to • habitability calculate the capital invested. • safety • comfort • energy efficiency If the reference price has been increased and the How is the reference price calculated if the owner home meets three of the special characteristics, can has done work in the last year? it also be increased to 5%?

The legal interest, increased by three points on the invested The maximum increase of 5% that is envisaged for the specific capital, must be applied, and the total increase can never characteristics of the home may not be applied if the price exceed 20% of the rental price. has already increased due to the home improvement work. To know the legal interest, click here. Example: Currently, the legal interest is 3%. If we add the 3 points: 6%. What if home improvement work is carried out while If the work carried was worth €2,000, €120 will have to be applied to the annual rent. Therefore, if we divide it by 12 the home is being rented? months, the result is that we have to increase the rent by €10 per month. In this case, the reference price can only be increased once the legal term of mandatory minimum duration of the If the rent is €800, applying 20%, we know that it can only be contract has elapsed; i.e., if the contract has a mandatory increased up to the maximum of €960. duration of 5 years, the reference price can only be increased But since in this case the amount to be passed on is €10 after these 5 years. per month, there is a rental price of €810, which will be the maximum that can be charged (it should not reach € 960, since that is a cap, not the price to apply.

Fast guide to the rent price containment law 8/10 Tense housing market Reference price Price increases Contract and incidents

What is improvement work?

Work involving installing new services in the home or improving existing ones, achieving greater comfort, hygiene or safety. It does not include repair work resulting from wear on the home (or the building) due to use in order to maintain its habitability.

Can this increase be applied directly?

No. The tenant must be notified of the increase, identifying the specific work that was done as an improvement.

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What must be included in the housing lease contract How to act in case of discrepancies between owner subject to the price containment system? and tenant?

The lease contract must state: When the problem occurs due to the determination of the rent and/or reimbursement of amounts paid in excess, there are two • The amount of the rent. potential solutions: • The document generated by the rental price indexing • Extrajudicial: system must be attached, specifying the value of the index corresponding to a home similar to the one being rented -- If it is between individuals, through mediation in the on the date of contract signing in €/m2, and specifying the field of private law. upper and lower price margins. Failure to comply with this -- If it is between a company and an individual, they can requirement is a minor infraction. go to consumer mediation and arbitration. • The amount of the previous rental price and the • Judicial: a claim for oral proceedings can be filed application of the Competitiveness Guarantee Index, regardless of the amount. or the causes justifying a change in this previous rental prices. Failure to comply with this requirement is a serious infraction. What are the amounts of the penalties imposed for non-compliance with the provisions of the rent What happens if the parties do not state the exact containment law? amount that they consider to be the reference price? The amount of the penalties provided for by Law 18/2007, on It is considered to be the price included in the Index without the right to housing (article 118): taking into account the lower or upper margins. • serious penalties: from €9,001 to €90,000 • light penalties: from €3,000 to €9,000 What happens if the owner charges a rent higher than the limit established by law? Who applies these penalties?

The owner must then return the difference to the tenant plus In accordance with Law 18/2007, of 28 December, on the the legal interest increased by 3 points. In addition, the owner right to housing, the imposition of penalties corresponds to the may be sanctioned in accordance with the penalty system laid town councils and the Administration of the Government of down by Law. Catalonia.

Fast guide to the rent price containment law 10/10 [email protected] [email protected]